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Cyprus: Staff Report for the 2014 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. European Dept.
Published Date:
October 2014
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Fund Relations

(As of August 31, 2014)

Membership Status: Joined December 21, 1961; Article VIII

General Resources Account:

SDR MillionPercent of Quota
Quota158.20100.00
Fund holdings of currency480.92304.00
Reserve position in Fund48.5430.68

SDR Department:

SDR MillionPercent of Allocation
Net cumulative allocation132.80100.00
Holdings110.6783.34

Outstanding Purchases and Loans:

SDR MillionPercent of Quota
Extended Arrangement371.25234.67

Financial Arrangements:

TypeApprovalExpirationAmount ApprovedAmount Drawn
DateDate(SDR million)(SDR million)
EFF5/15/135/14/16891.00371.25

Projected Payments to the Fund (SDR million; based on existing use of resources and present holdings of SDRs):

20142015201620172018
Principal6.1943.31
Charges/Interest1.013.993.993.993.82
Total1.013.993.9910.1747.13

Exchange Rate Arrangement and Exchange Restrictions:

Cyprus’s currency is the euro, which floats freely and independently against other currencies. Cyprus has accepted the obligations of Article VIII, Sections 2, 3, and 4. Cyprus maintains three exchange restrictions under Section 2(a) arising from: (i) limits on payments for certain transactions involving normal business activity, including the import of goods and services; (ii) limitations on certain invisible payments by individuals, including firm limits on remittances for living expenses for certain family members; and (iii) limits on access to certain funds deposited with financial institutions in Cyprus that prevent non-residents from accessing, converting and transferring out of Cyprus recently acquired net income from current international transactions or investment income.

Safeguards Assessment:

The CBC has made progress in implementing recommendations since the 2013 safeguards assessment in the areas of governance, financial reporting transparency, and internal audit. However, some measures to further enhance financial reporting and strengthen the legal framework still remain outstanding. The CBC continues to publish its audited financial statements in a timely manner.

Last article IV consultations and program relations:

The last Article IV consultation was concluded on November 18, 2011 (IMF Country Report No. 11/31). Article IV consultations with Cyprus are on the 24-month cycle during the Extended Arrangement.

Cyprus’s three-year, SDR 891 million (563 percent of quota) Extended Arrangement under the EFF was approved by the IMF Executive Board on May 15 2013, and the first four reviews under the program were completed on schedule.

Technical Assistance:

DepartmentPurposeDate
MAEGovernment debt managementFebruary-March 1989
FADVAT training programJune-October 1992
MAEFinancial sector liberalizationNov.-Dec. 1993
MAEReform of government securitiesApril-May 1994
STASpecial data dissemination standardAugust 1997
STABalance of paymentsMarch 1999
STABalance of paymentsMay-July 2001
STABalance of paymentsNov. 2001-March 2002
STABalance of paymentsApril-June 2002
FADPublic investment and PPPsMarch-April 2006
FADMedium-term budget frameworkMay 2006
FADMedium-term budget frameworkOctober 2007
STASpecial data dissemination standardMay 2007
STASpecial data dissemination standardMarch 2009
STABalance of paymentsJuly 2011
FADPublic financial managementFebruary 2013
FADRevenue administration diagnosticFebruary 2013
FADExpenditure rationalizationFebruary 2013
FADPublic financial management follow-upApril 2013
MCMNatural resources managementJune 2013
FADSocial welfare reformJune 2013
FADPublic financial management follow-upJune 2013
FADOrganic budget lawAugust 2013
FADRevenue administration reformSeptember 2013
FADProperty taxOctober 2013
MCM/LEGSovereign wealth managementNovember 2013
FADRevenue administration reformNovember 2013
LEGDebt restructuring legal frameworkNovember 2013
FADMonitoring guarantees and SOEsDecember 2013
LEGCapacity development in AML/CFTJanuary 2013
FADPublic financial management follow-upMarch 2014
LEGTax administration legal frameworkMay 2014
FADRevenue administration follow-upJuly 2014
FADPublic financial management follow-upSeptember 2014
MCMDebt managementSeptember 2014

An FAD long term PFM resident advisor assumed her position in February 2014.

Resident Representative:

Mr. Vincenzo Guzzo assumed his position in September 2013.

Statistical Issues

I. Assessment of Data Adequacy for Surveillance
General: Data provision is adequate for surveillance.
National accounts and real sector data: In September 2014, the new European System of National and Regional Accounts (ESA 2010) will replace the current ESA 1995 implying methodological changes and historical revisions to national accounts series.
Financial sector data: The CBC has adjusted reporting guidelines to comply with European standards. While past data has been restated, the structural break may result in errors in the time series for the data preceding mid-2013. The migration to Basel 3, which will begin in 2014, implies a change in the definitions of capital and risk coverage and will generate a structural break in the time series.
External data: The CBC compiles and disseminates balance of payments statistics in national publications on a quarterly basis and annual basis. This data treats Special Purpose Vehicles (SPVs) as non-residents. The authorities will begin the publication of balance of payments data on the basis of BPM6 in November 2014. In the past, current account statistics have been subject to very large revisions due to misclassification of items in the income account.
II. Data Standards and Quality
Cyprus subscribes to the Fund’s Special Data Dissemination Standard (SDDS). Cyprus’s economic database is comprehensive and of generally good quality. Data are provided to the Fund in a comprehensive manner (see attached table). The authorities regularly publish a wide range of economic and financial data, as well as a calendar of dates for the main statistical releases. Cyprus is also subject to the statistical requirements and timeliness and reporting standards of Eurostat and the European Central Bank (ECB), and has adopted the European System of Accounts 1995 (ESA95). No data ROSC is available.
Cyprus: Table of Common Indicators Required for Surveillance

(as of August 31, 2014)

Date of Latest ObservationDate ReceivedFrequency of Data7Frequency of Reporting7Frequency of Publication7
Exchange RatesCurrentCurrentDDD
International Reserve Assets and Reserve Liabilities of the Monetary Authorities1July 2014Aug. 2014MMM
Reserve/Base MoneyJuly 2014Aug. 2014MMM
Broad MoneyJuly 2014Aug. 2014MMM
Central Bank Balance SheetJuly 2014Aug. 2014MMM
Consolidated Balance Sheet of the Banking SystemJuly 2014Aug. 2014MMM
Interest Rates2CurrentCurrentDDD
Consumer Price IndexJuly 2014Aug. 2014MMM
Revenue, Expenditure, Balance and Composition of Financing3 - General Government4July 2014Aug. 2014MMM
Revenue, Expenditure, Balance and Composition of Financing3- Central GovernmentJuly 2014Aug. 2014MMM
Stocks of Central Government and Central Government-Guaranteed Debt5July 2014Aug. 2014MMM
External Current Account Balance2014:Q1Aug. 2014QQQ
Exports and Imports of Goods and Services2014:Q1Aug. 2014QQQ
GDP/GNP2014:Q1Aug. 2014QQQ
Gross External Debt2014:Q1Aug. 2014QQQ
International investment position62014:Q1Aug. 2014QQQ

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government, social security funds and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Not Available (NA).

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government, social security funds and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Not Available (NA).

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